A deficit adjusted for inflation should include only government spending used to make _____ interest payments.
A) real
B) nominal
C) foreign
D) domestic

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money over time. Therefore, a deficit adjusted for inflation should only include government spending used to make real interest payments, which are adjusted for inflation to reflect the actual value of money. Nominal interest payments do not take inflation into account and therefore should not be included in the calculation of an inflation-adjusted deficit. Foreign and domestic categorizations are not relevant in this context.

A Deficit Adjusted for Inflation Should Include Only Government Spending